Archive for February, 2007

U.S. stock markets notched their poorest performance since September 2001, right after the terrorist attacks on the World Trade Center and Pentagon.
The Dow fell 416.02, or 3.29%; the Nasdaq dropped 3.9%; the S&P 500 index fell by 3.5%. Earlier in the day the Dow had dropped over 500 points. All thirty stocks in the average were down for the day.
This fall comes on the heels of the worst day in ten years for China’s Shanghai Composite Index, which fell 8.8% yesterday.

The U.S. Equity selloff was greater than any other market, except for China, though the effect was global.
Weakness in Asia has spread global, as Japan’s Nikkei and Topix notched losses of 0.5% and 0.3%, respectively.

The United Kingdom’s FTSE and the German DAX were both down 2.3%, and the French CAC-40 dropped 2.6%.

It is possible that the bloodletting is not over, with U.S. equities, typically less volatile than emerging and developed global markets, being hit so hard. Such a selloff on Wall Street is likely to shake European and Asian markets during the coming trading sessions.

Bonds posted strong gains throughout the day, and, along with dividend-paying stocks that have been hit significantly, are expected to provide stability in the coming trading days.

Stocks are sharply down Tuesday, with the Dow down 1.6% and the Nasdaq down 2.5%.

While this is being called a correction, it certainly has many investors concerned, but the main concern is the damage done to emerging markets and, in particular China, which appears to have quite a way to go before hitting bottom.

Risk-averse investors should take note, however, that volatile times are among us, and there are safer bets than the current buying opportunities presented by the recent declines.

According to the New York Times Online edition, the SEC has sent letters of inquiry to four major investment banks: UBS, Merrill Lynch, Morgan Stanley, and Deutsche Bank. The letters apparently request all stock and options trading activity for the last two weeks of September, the close of the third quarter.

Presumably, the SEC is looking into large block trades to try to determine if certain traders or hedge funds were able to access this data before trades were executed. Prior knowledge of large market-moving trades would put an individual trader at an advantage by knowing how the market will react before it is actually affected.

The investigation seems to be focusing on whether large brokers are tipping off preferred clients (or insiders at the bank who may be trading independently) before executing large orders.

In unrelated news, RenaissanceRe has settled securities fraud charges with the SEC by agreeing to retain an independent consultant and pay a fine of $15 million. RenRe’s fraud involved a phantom transaction for $26 million that allowed the company to defer revenues from 2001 to 2002 and 2003. You can read the whole article at the SEC’s website.